5G Spectrum Auction: Direct spectrum allocation to tech firms may hit 5G airwave demand at auction

The latest government regulations that would allow large tech companies to set up parallel pan-India captive 5G networks, bypassing telecom carriers, would dampen demand for critical C-band (3.3-3.6 GHz) airwaves in the upcoming 5G auction, telcos have said.

The new rules for captive private network rollouts announced on Monday would degrade the business case for carriers to invest strongly in airwaves and next-generation mobile broadband network deployments, telecom industry executives told ET.

“The new rules would definitely hit the 5G business case of telcos and reduce their appetite for expensive C-band 5G spectrum in next month’s auction to around 40-50 units,” a top executive of one of the three private carriers told ET.

Tech companies are not entirely happy about the situation either.

The Department of Telecommunications’ decision to undertake demand studies and then seek recommendations from the sector regulator could severely delay direct spectrum assignments to enterprises and give telcos a first-mover advantage in the captive 5G networks game, they said.

Telcos, on their part, are also miffed with DoT’s decision not to charge enterprises any licence/entry fees for direct spectrum allotments to set up captive 5G networks to connect their facilities across the country, and instead levy a nominal processing fee of Rs 50,000.

This would allow large tech companies to connect their factories via private 5G networks, paying modest leased line charges to operators, telcos said. Such a scenario would rob telcos of potential 5G enterprise revenues and create uncertainties around the viability of their 5G offerings, they said.

There is “no real skin left in the 5G enterprise game for telcos” as the leased line charges that big tech companies would pay is estimated at a negligible 1% of the latter’s revenues, said the executive quoted above.

At press time, ET’s queries to

, Jio, and the Cellular Operators Association of India (COAI) went unanswered.

Industry executives said the latest rules on captive rollouts could intensify the tussle between telcos and tech players on controlling 5G spectrum to be used for building captive non-public networks (CNPNs). Telcos fear access to 5G spectrum without auctions would allow tech companies to offer similar 5G enterprise services at a much lower cost and undermine their 5G business case.

Tech players, though, said enterprises might ultimately lose out to telcos in leveraging the emerging market for captive private 5G networks due to likely delays in direct spectrum allotments.

T V Ramachandran, president of Broadband India Forum (BIF), said DoT’s decision to undertake demand studies and then seek Trai’s recommendations “is a smart way of completely delaying this option (read: direct spectrum assignments)”. He added that “enterprises and Industry 4.0 have clearly lost out as there is no time-frame either for the DoT study or the regulator’s recommendations on this matter”.

BIF counts tech companies such as

, Cisco, Amazon, Google, Microsoft, Facebook owner Meta, Qualcomm and Intel among its key members.

Some tech players, though, are more optimistic, saying they can always lease spectrum from telcos to set up captive private networks if direct assignments take time. “Even if DoT’s demand studies and Trai’s recommendations take time, we can go for leasing from telcos or even be tech partners for our end-clients,” said an executive of a top Indian IT firm.

Enterprises can set up captive 5G networks by leasing spectrum from operators or by getting the latter to set them up for them.

Analysts, though, said private captive 5G network rollout would pose B2B monetisation risks for telcos. “If enterprises acquire (private) spectrum directly, they would not leverage the airwave holdings of operators, and this could lead to loss of revenue generation opportunity for telcos,” BofA Securities said in a report.